Choose your preferred format
SR: Hei, du lytter til Lørn.tech. I dag er tema blockchain og gjesten min er Lawrence Wintermeyer. You’re the principal at Elipses. Can you tell me about yourself and how you became interested in blockchain technology?
LW: I spent my carrier in financial services and started off in financial technology, though I been mainly focusing on invest management and asset management sectors. I live here in Oslo of all places, but I still work in London which is the financial services capital. I had the opportunity to set up something called innovative finance which was the fintech eco community start was started by the previous UK government. Blockchain is a really big part of financial services and that really does architecturally offer a great underlying technology to solve all complex problems in financial services from identity to security and what we would called the origination, the provisions, the authority, the transaction. So I’m back in private practice. I does nothing but adice rework on financial digital structure products and digital in the blockchain space, we call it digital assets. I first noticed it 10 years ago and this the 10th anniversary of Satoshi white paper which was on November the 31st.
SR: Satoshi white paper, you have to tell us about that.
LW: Satoshi whoever he may be.
SR: Or they.
LW: Or her. Started this whole blockchain fenomena. Particularly around the idea of having a currency which we call bitcoin, which is a product of the blockchain and is not a fiat or asset backed currency.
SR: Bitcoin was the reason why the blockchain technology was made?
LW: Exactly. Blockchain in essence was born out of Satoshi requirement for in this case a digital currency or what we call a cryptocurrency. That’s ten years old and the anniversary was wednesday on halloween of all things.
SR: The white paper is the explanation or explains the technology?
LW: Broadly in the educational world, from my part of the world, in the US or the UK, would typically produce a white paper as a means of a concept paper, describing something. This is really coming from the west coast. And in fact you see a lot of startup technology places in the blockchain or distributed ledger space still using white papers in a means describing commercial opportunities. Which I wouldn’t particularly say is desrbrining a startup, but is definitely a legacy from the academic area. Satoshi white paper really started it all. In fact, I think it was probably that time I met Silvija. We were on the board together in a company. We weren’t talking about blockchain, but I noticed it particularly because it solves a lot of complex problems when it works.
SR: If I understand this correctly. It’s ten years this paper came out and that was describing the blockchain technology to get bitcoin, which is a cryptocurrency. I think when most people hear about blockchain they think bitcoin or cryptocurrency, but they don’t think it’s anything more. The blockchain technology was made for bitcoin, but the blockchain technology can be used for so much more than cryptocurrency.
LW: Absolutely. Ten years ago, what I paid attention to was the underlying technology which ultimately what blockchain does is disrupted data model. So it creates blocks which it keeps adding and distributing ledger.
SR: What is block?
LW: A block in this case is a single unit or record for the purpose of this discussion. It’s distributing meaning your record is on many different computers and in this case all of those computers in case the blockchain is a part of the consensus.
SR: The internet is not on one single machine, we all have the internet.
LW: Correct. The internet is the connection of different machines, all a part of a singular network if you want to look at it that way. The blockchain in particular is a connection of computers that are all together. This individual block or record which might contain your personal identity or details, can be find simultaneously across the network but is only unlocked through the second part of blockchain which is a cryptographic key. And so what makes it reliable from the perspective of data is that once that block of data is created it’s replicated around the network and that is only unlocked by the cryptographic key.
SR: That’s important that it’s recreated everywhere?
LW: It is an important part of Satoshi's concept example for cryptocurrency because anybody that’s into currency in particular government currency, which we call fiat currencies, know that they are highly centralised. So the single point of consensus in this case is the central bank. In the concept of cryptocurrency it is an algorithm generated currency where the consensus network is all of the networks. That’s too complicated for most people, ultimately this is one of the big challenges of cryptocurrency, other currency which you can use them to buy bread and milk and shop, and cryptocurrency is not there yet. You can’t do that anywhere. They’re point of consensus is redemption, which the average use of need to buy bread or milk is pretty low. That’s really what we’re about to see in the development of things like cryptocurrency. The future of how those currencies will be redeemed or used by normal people.
SR: The blockchain technology is more than just cryptocurrency, but you work with cryptocurrency?
LW: I particularly work with digital assets more than cryptocurrency.
SR: What is digital assets?
LW: For example, stocks are securities, and bombs are security, and then commodities typically trade as security. There’s a whole market that’s around commodity and those that are increasingly digital. We don’t get paid per shares when we buy stocks these days. The focus on using disrupted ledger technology or the blockchain to create digitalised assets and so for this purpose, tokenized assets or tokenized security, it’s a really big space. It’s what a call the second wave of tokens or digital security. We’ve ten years of bitcoins, all sorts of cryptocurrencies. We’ve had four years of tokens and initial coin offerings in early stage companies. Now we’re seeing the blockchain or disrupted ledger technology being development in use cases for traditional security.
SR: What are tokens? I get a gamification picture when you say collect tokens.
LW: It could have been something you put in your laundry machine. But in this case tokens are a derived or a certain type of crypto token. They’ve grown broadly. What’s made them popular is a theory which is probably one of the biggest fabrics or distributed ledger technologies and something called a smart contract. What tokens have been used for particularly in the last four years is if I’m a blockchain startup and I got a brand new distributed ledger or blockchain competitive fabric I’m trying to create or some sort of a cool, new blockchain startup that could be related to sport or consumer goods.
SR: When you say blockchain startup, it’s easy to think your startup is making blockchain, but when you’re a blockchain startup you use blockchain technology to do something with..?
LW: No, it’s a lot of blockchain startups. We were mentioning some of the protocols before. I’ll start from the top here. There are few new ones that are interesting. Ico for example is a new distributed fabricer technology that would set out to compete with conecsus and the blockchains and all of the other ones. There are tons of these, but the bigger ones are an example. There are many developers developing their own distributed ledger or equivalent to blockchain fabrics. In the ISL or the Ico space, we’re back to what tokens are being used for, they’ve broadly been just as early stage capital. So replaced venture capital in some instances and what it gives investors is a share in that actual blockchain startup or product. That’s why it’s important to look what’s in the white paper and what sort of startup. Broadly, they way I look at (?), it’s a token for early stage capital, it’s replaced broadly for four years ago, replaced the equivalent for venture capital or share ownership. But now the SSC stopped it. Those tokens has to been treated as security other than any other form of security dirivided.
SR: What are the controversies about blockchain technology?
LW: It’s so many that I don’t know where to start. Broadly if you’re a government, let’s take cryptocurrency first, the risk of cryptocurrency is the underlying vularititly and people are getting exposed to retail risks in trading them or holding them. Do average consumer who can set up trading accounts on trading sides really understand the risk in them because the volatility is one of the most volatilite things on the planet. Many people don’t even consider them an asset class. Exposure to cryptocurrency in the volatility is one from a consumer perspective. For tokens, the biggest you see from the policy makers is what they actually are doing. Are they actually just ripping people off? Are they trying to attract money? Do they have any hope in actually delivering any sort of benefit of people investing in them? From the G70G20, the biggest issue around what we will call decentralised changes in the blockchain or distributed ledger technologies is about security. Because the thing about blockchain is you and I can trade bitcoin or other things on the blockchain as anonymous counterparties. Is it moneylaudering or is it financial terrorism being financed? I will start with the last one. I don’t think the last one should be a huge concern giving the whole size of the digitalised asset is about 250 billion, which is about the size that one Danske Bank branch managed to laundered in Eastern Europe. Is disproportalised sense of financial crime related to the blockchain. I do believe that they are protection that need to be put in place, particularly for consumers using it. I’ve just set up a group of partners around the world, something called Global digital fiance, it’s all about putting codes of conduct in to make sure that the players and the actors in the industries are responding to that. It’s early days, but I think most people believe in the financial services context we don’t want to see this great, new technology that has a great application being destroyed because consumers are being ripped off.
SR: Can you being very brief about your favourite examples from the blockchain technology?
LW: I’m a big fan of bitcoin. I just think that it needs to be packaged in a way that’s easy to use and the community has quite a bit to communicate around what it use case is. Will it ever replace the kroner or the US dollar? I wouldn’t care to speculate but it has a lot of use in any conversion from one currency to another. It’s a great first model of a known fiat digital currency. Things like what we would call treasury tokens, it’s all sorts of works going on on many different distributed ledger fabrics were institutions are using blockchain to be able to transfer money between each other in tokenized fashion. That’s very popular. The smart contract and being able to put securities, commodities, stocks transactions, any type of company transactions, smart contracts it’s a huge area for the next ten years. That’s the sort of stuff we do in Elipses.
SR: If you want to learn more about blockchain, what would you recommend?
LW: If you just google blockchain and go to wiki, that’s always a great start. My fellow co-founder in Global digital finance, Simon Taylor runs a podcast called “Blockchain Insider” at 11:FS. If you’re a geek on the blockchain financial services space particularly you’ll walk away with much more knowledge than you need to know about that.
SR: But you also think some people should read the Satoshi paper?
LW: You can, but you need to be into white papers. If you’re a rocket scientist and you have a physics Phd you should read it.
SR: If you’re suppose to remember at least one thing from this talk, what is it?
LW: Blockchain and distributed ledger technology is hugely important to identity, security and provenance because it’s a distributed data model with cryptographic or kifer (?) key handshake. That’s probably one of the most resilient undercurrence of technology. If you’ve been in technology all of your life, when you read Satoshi white paper you thought “that’s really elegant”. We’ve had both cryptography and distributed data for more than 40 years, no one has managed to put it together.
SR: Thank you, Lawrence Wintermeyer.
What do you do at work?
I do advocacy and have founded Global Digital Finance - a global members association promoting digital assets and professional standards. Also, I’m an advisory in structural digital financial products, investment and asset management, and innovation ecosystem development.
What are the central concepts in your tech?
Distribution of data on a consensus network with cryptographic key.
Why is it exciting?
The potential for useful applications to businesses and the society are massive.
What do you think are the relevant controversies?
The SEC’s treatment of all tokens as securities and its relationship to utility tokens.
An example of a project you’ve worked on yourself?
UN Sustainable Development Goal (SDG) investment securities.
Your other favourite examples, internationally and nationally?
Digital assets such as securities and commodities.
What do we do particularly well in Norway or in your country?
Community collaboration like Lørn.
A favourite future quote?
Bitcoin is a technological tour de force by Bill Gates.
A fun fact about blockchain?
Bitcoin miners consume the annual power equivalent to Denmark.